The 75-metre-high tower of Lister's Mill symbolised the power and status of Bradford during the city's industrial heyday. It was the largest silk factory in the world, churning out the velvet for King George V's coronation. But now the former mill has come to symbolise all that is wrong with the British economy in the wake of the banking crisis: the heavy machinery has been replaced by pristine bathrooms and kitchens in luxury flats whose value has almost halved in five years.

It is just visible from a light and airy office that sits at the foot of the Aire Valley and houses £80bn of taxpayer-controlled mortgages, including the Bradford & Bingley Mortgage Express operation. One of its loans, to a London-based buy-to-let landlord to acquire flats "off plan" in the Bradford mill in the heady days before the 2008 crisis, illustrates the scale of its task. Sharon Lambert, an adviser at Mortgage Express, says the landlord never visited the properties: he paid £200,000 apiece for flats now valued at £110,000, and is receiving half the rent he was promised.

With interest rates at record lows and on a mortgage that tracks 1.75 percentage points above base rate, the landlord can keep his head above water – in part subsided by four properties in Liverpool. But a half percentage point rise in interest rates from the record low of 0.5% would tip him over the edge, says Lambert, who is one of a growing workforce employed by the taxpayer-owned Bradford & Bingley to discuss with customers the impact of a rate rise on their ability to repay their mortgages.

The problem is particularly acute for UK Asset Resolution (UKAR), which owns Mortgage Express, other mortgages from B&B and some £44bn of "bad" mortgages from Northern Rock. Although the taxpayer-owned UKAR reported a profit for last year, customers of B&B and Northern Rock Asset Management (NRAM) – the part of the lender not up for sale – mortgaged themselves up to the hilt just as the housing bubble burst and are potentially the most vulnerable to a rate rise.

Buried deep in the West Yorkshire countryside in Crossflatts, UKAR is facing the dual challenge of tracking down those customers who it thinks could get into difficulty once rates go up, and helping the 23,000 customers who are already six months in arrears – even at the current rock-bottom rates.

Tim Newman, head of marketing at UKAR, spells it out: "My job over the next 12 months is to get people aware what is going to happen when interest rates go up." Online calculators are being created to match a telephone charm offensive

But UKAR is also tackling the "forbearance" offered to 44,000 customers last year by, perhaps, reducing monthly repayments to help them stay in their homes. The chief executive, Richard Banks, a former Alliance & Leicester banker, is blunt: "As a kneejerk reaction in the emergence of the crisis and because the government asked us to be forbearing to customers in the hope it would all go away – we as an industry have been too lenient with some customers."

He added: "It's a tough love approach. It's treating customers fairly, not nicely ... because if you can't afford your mortgage you are only increasing your indebtedness. If we allow you to increase your indebtedness, that's not really fair to you."

By calling customers in distress – or even before the alarm bells start ringing – Banks hopes to avoid the repossession rates that haunted the Thatcher government (the keys were taken from 95,000 homeowners in 1991 alone). Official industry forecasts are for 40,000 repossessions this year.

"You can see that if you don't do something about it, there will be a tsunami. If you don't get into the hills, you could get drowned by this. If you don't manage this properly, it could get very messy," he said.

A small rate rise is manageable for most customers; fast rises are of more concern. Action is already being taken. Erika Swales, operations director, said Northern Rock had been waiting 31 days after a missed mortgage payment before contacting customers. Since January, however, the calls have been made just a day or two later and the impact is already being felt in holding arrears flat. Even so, repossession numbers are expected to rise – B&B had 623 homes in possession and NRAM 1,984.

Calls are made from three centres, in Crossflats, between Bradford and Bingley; Gosforth, home to Northern Rock, and Doxford in Sunderland. In Crossflats, Mohammed Ali leads a team responsible for cold-calling customers to talk about interest rates and budgeting. "A lot of people are worried. They think 'if I tell [the bank] they'll take my house', which is far from what we want to do," he said.

Ali also needs to keep his team motivated, a tough task given that UKAR has a limited lifespan as it can no longer sell new mortgages. Others talk about the training they and their colleagues are receiving to ensure they can find employment after UKAR. Although the last mortgage will not be paid off until 2049, it should be a smaller operation by 2021. "It's our responsibility to get them ready for their next job," said commercial director Andy Wiggans

All monies that come in are used to pay off a £47.8bn taxpayer loan or feed the securitisation vehicles Granite and Aire Valley, which were used by Northern Rock and B&B to fuel their mortgage lending.

Just over £1bn was paid back last year and UKAR is urging wealthier customers to do so quickly: Lambert has just come off the phone with a buy-to-let customer who can take advantage of the low rates by overpaying £1,000 a month.

Banks notes that job prospects at UKAR are better than he first expected. Last month he rewrote the business plan presented in November, when UKAR was created to explain the early assessments of interest rates to customers. The previous plan assumed that arrears would peak three years after 2009 and then decline but the new one shows arrears have yet to peak before dropping off again and then rising in 2015 – when George Osborne hopes his plan A will be delivering economic growth, but when interest rates could be reaching 5%.

But Banks refuses to agree that the outlook is all grim. "It's solvable," he said. "This is something that will be a great success."

Pressed in Corby

Corby in the east Midlands is the place where homeowners are most vulnerable to repossession, according to the housing charity Shelter. Its map of repossession hotspots in England and Wales shows a "red ribbon" running across the north of England following analysis of Ministry of Justice figures for repossession orders in the first three months of 2011. The charity warned that homeowners need to be prepared for a rise in interest rates – which could put even more at risk of losing their homes.

At UK Asset Resolution (UKAR), the taxpayer-owned body that looks after Bradford & Bingley mortgages and £44bn of Northern Rock mortgages, staff are on alert for signs of customers struggling to keep up repayments on their home.

A cancelled direct debit can be an early warning sign, as can the informationdata provided by the Callcredit Information Group, a company thatwhich collects data about customers' finances.

UKAR's advisers try to discuss budgeting with customers in difficulty. Dropping a subscription to Sky, for instance, might be suggested, along with cutting up a credit card.

Temporary solutions can be found, such as reducing payments for a month or two, but eventually the lender will need proof that customer can keep repayments going. A non-executive director suggested to UKAR that one way to tackle the impending rate rise would be to put all customers on a 3% fixed rate. While that would help those in difficulty, it would prevent the bank getting in income from those who can afford to pay.